Bestway’s purchase of a stake in Sainsbury’s has come out of the blue. While Bestway says it doesn’t intend to make a bid now, there is logic in putting the two companies together, with echoes of how Tesco thrived from buying Bookers.
AJ Bell’s Russ Mould said: “As the UK’s largest independent cash and carry business, Bestway’s strategy is to be seen as a place where retailers, caterers and cafes can obtain all the stock they need at a good price.
“If Sainsbury’s was part of the same group, both sides could benefit. In theory, Bestway could tap into the supermarket’s buying power and obtain stock at a lower price, thus making its proposition more appealing for its customers. Sainsbury’s could expand its reach and have good access to a broader customer base including foodservice and pet shops, while also being able to compete better against Tesco.
“While Bestway says it won’t make a full takeover bid now, the fact it has openly stated it wants to buy more shares implies it wants a seat at the table. Having a stake above 3% arguably gives Bestway the power by which to demand proper conversations with the business and push for a seat on the board of directors.
“A notable stake in the business also suggests it is serious about wanting to collaborate. It’s very rare for these types of transactions to simply be about making money from owning the shares. Bestway says its intention is to hold the shares for investment purposes, but the extra line that it ‘looks forward to supporting the executive management team’ implies that this is going to be a hands-on relationship.
“Publishing a statement inviting existing shareholders to sell some or all their stake to Bestway also suggests it is serious about building up its stake in Sainsbury’s.
“Should Bestway want to make a full bid down the line, it would have to make a convincing offer to get Qatar Investment Authority to want to part with its 14.3% stake, and the same for Vesa Equity Investment which owns just over 10% of the supermarket.”